Did CAPM Jump the Gun With Marka IPO Announcement?

Marka – an under-formation company focused on the fashion retailing and F&B sectors – is looking to list on the Dubai stock market.

Reuters

For a market deprived of IPO activity since the global financial crisis, the local press can be forgiven for lapping up the announcement of a company’s planned listing on the Dubai bourse.

Dubai stocks went from boom to bust as its property market tumbled and the emirate struggled to repay its debt in the aftermath of the 2008 crisis. But those days are well in the past and its market is rallying again – reflecting a strong recovery in Dubai’s economy on the back of a sharp pick-up in trade and tourism, along with a return of appetite for its real estate projects.

Not surprising then that Abu Dhabi-based CAPM Investment’s announcement of a planned IPO for Marka – an under-formation company focused on the fashion retailing and F&B sectors – was well received.

Great news so far, barring some key questions: What was the hurry in announcing the IPO plans given the company is still being incorporated and the statement issued so far doesn’t even name any of the “100 plus” founders? And how does Marka fulfill one of the key DFM listing requirements – that any company looking to list “should have been incorporated for not less than two years” with audited financial statements issued for each year.

Usually such IPO news is strongly welcomed by all the entities involved. A Dubai bourse official however declined to comment, and so did a Securities and Commodities Authority official. A senior CAPM executive meanwhile said the company isn’t answering “any media inquiries or doing interviews at the time being”, when asked to clarify in an email.

CAPM, the financial advisor and lead manager of Marka’s proposed IPO, in a statement earlier this week said the company has “begun receiving equity contributions from its founders soon after it received preliminary approval from the Securities and Commodities Authority”.

It noted that the company’s founders are an “elite group of U.A.E. nationals, including VIPs, businessmen and investors, along with a select group of non-local investors” that have “high confidence in the new operations to be rolled out by Marka”. CAPM added it expects the process of founders’ equity subscription to be completed within the next few days, to be followed by securing final approvals for the launch of the IPO in the coming weeks.

The announcement definitely helped generate buzz, and shows there’s appetite for such an IPO – in case some investors needed any more convincing. A strong early-year rally – the DFM is up some 23% so far after soaring 108% in 2013 – may have also pushed the case for the planned IPO to be hurried through.

“The founders expect the IPO to be a huge success, given the significant growth prospects enjoyed by the company on the one hand, and the return of confidence to the financial markets on the other,” the CAPM statement said.